By: Eric Plasse, Principal
Change or die…In today’s digital age, industry innovators have forced Insurers to consider dramatic shifts to their business strategies and enabling technologies. As new players have entered the market, and long-established firms have successfully transformed, doing ‘nothing’ is no longer an option for those organizations that have stood idle. To compete in an ever-changing market, organizations must evolve or die. However, the challenge can be daunting and the risk of failure high. Before starting the journey, organizations must recognize and address the following barriers to change:
LACK OF TRANSFORMATIONAL LEADERSHIP AND EXECUTION
Leadership means more than laying out a vision. Leaders must take the helm to drive and encourage innovation and execution. Transformation requires a truly different kind of thinking. True transformation requires leaders who can ‘lead from the front,’ inspire, and be the catalyst for change. To foster an environment that challenges the status quo and empowers the team to explore new ideas, transformational leaders must set aside their own potential biases.
Organizations must hold the collective accountable for achieving results. Beyond the transformation leader, it is critical to assemble a supportive group of stakeholders who can act as change champions across the organization. Performance goals and incentives must align for each team member – from sponsor, to stakeholder, to analyst. Doing so ensures that irrespective of the role, each team member has a bottom-line financial stake in seeing a successful outcome. Consider assigning common key performance indicators to each department to encourage cross-department collaboration.
COMPLEX PRODUCTS AND SUPPORTING SYSTEMS
To compete among peers and newcomers that appeal to a new generation of buyers, it’s critical that businesses have both a product and technology plan in place that supports innovation and simplification. In a rapidly changing, consumer-driven market, the need to incubate, experiment, and swiftly deliver new insurance products and services is dependent on a flexible and business-friendly technology architecture.
Developing a plan to take advantage of emerging technologies – such as artificial intelligence, machine learning, and modern administration platforms- as part of your overall technology strategy is key. Understanding how these new capabilities can be leveraged to streamline product development, improve service, and take advantage of existing data sources must be a priority for the organization.
Advances in technology have enabled a digital transformation, spawning an entirely new crop of competitors. Because they were born in the digital age, these companies typically operate on cloud-based ‘modern’ systems – unencumbered by complex and inflexible legacy systems. These new competitors – such as Lemonade and Slice— have built customer-centric solutions that harness new technology capabilities. Customer-centric technology capabilities – such as easy applications in as little as 90 seconds, payouts in as little as three minutes, and no paperwork- are table stakes in this new age of tech modernization.
MISALIGNED BUSINESS AND TECHNOLOGY STRATEGIES
Think: if the technology is the highway and your highway is peppered with speed bumps, potholes, and construction, your car isn’t going to make it very far or travel very fast. Too often, technology leaders fall in love with a solution before they fully understand the problem to be solved. These leaders often base their technology strategy on the latest trends or follow in the footsteps of their competitors. This misguided approach often leads to solutions that are over-engineered and designed for failure.
Today more than ever, it is critical that businesses have a technology plan in place that closely aligns with the overarching business strategy. In doing so, your business will enjoy a smoother, faster ride. With business and technology strategy aligned, organizations can implement new tools, improve data capabilities and intelligence gathering, and add systems that accelerate innovation, respond to disruption faster, and improve the customer experience.
Consider the needs of your customer base and then prioritize systems that support these expectations. For instance, while many customers prefer a self-serve model, insurance products can be complex. A life insurance policy may be delivered direct, but annuities can be more intricate. To support a self-serve model, consider offering on-demand learning or chatbots that can provide advice—easy additions that don’t require too much lift, but can quickly enhance the customer experience.
The pace of change today is accelerating across most industries, and yet for many insurers, the change of pace is often slowed by mandates, regulations, and antiquated internal systems and processes. Therein lies both the challenge and the opportunity. Because the pace is slower industry-wide, insurers can experiment with new technology, without ‘betting the farm’ – a luxury that many new entrants to the insurance market cannot afford. Long-established brands have the advantage of a loyal customer base and robust amounts of data needed to enhance the customer experience, create new products, and anticipate changing customer needs.
So while risk aversion is at play, conventional insurers have the benefit of a mostly level playing field (when it comes to legal and government compliance) and should consider slowly filtering in new technology and offers that aim to enhance customer experience and differentiate.
With these guiding principles in mind, the time to launch is NOW! Organizations that can develop transformational leaders, simplify products/product development, execute a clearly aligned business and technology strategy, and take smart, calculated risks are best positioned to solve the modernization ‘riddle’ and reap the benefits of their investments.